SecProbe.io

CORRESP
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filename1.htm

June 30,
2010

Mr. James
Rosenberg

Senior
Assistant Chief Accountant

United
States Securities and Exchange Commission

Division
of Corporation Finance

Mail
Stop 4720

100
F Street NE

Washington,
D.C.  20549

RE:  File Number 001-02189

Dear
Mr. Rosenberg:

In
reply to your letter of June 16, 2010, we have enclosed our response in
the attachment to this letter.

As
per your request, Abbott acknowledges that we are responsible for the adequacy
and accuracy of the disclosure in the filing; staff comments or changes to
disclosure in response to staff comments do not foreclose the Commission from
taking any action with respect to the filing; and Abbott may not assert staff
comments as a defense in any proceeding initiated by the Commission or any
person under the federal securities laws of the United States.

Very
truly yours,

  /s/
  Thomas C. Freyman

  Thomas
  C. Freyman

  Executive
  Vice President, Finance and Chief Financial Officer

Enclosure

Abbott Laboratories

Form 10-K for Fiscal Year ended December 31,
2009

Definitive Proxy Statement on Schedule 14A

Filed March 15, 2010

File No. 001-02189

Form 10-K for the fiscal year ended December 31,
2009

Item 7.  Management’s
Discussion and Analysis of Financial Condition and Results of Operations

Financial Review, page 26

1.                                       Refer to your
response and proposed disclosure to our comment two.

·                  Please revise your proposed disclosure to
indicate which projects are individually material.  Indicate in your disclosure both the
qualitative and quantitative factors that you considered in making this
determination.  For those projects that
are individually material, please revise to disclose all the information listed
in our prior comment two.  If information
is not obtainable or if an amount or range of amounts cannot be estimated,
specify in your disclosure which is the case, and disclose why.  We believe that this information is material
to investors and unless you can demonstrate otherwise, we do not believe that
it should be excluded based on your assertion that it would be detrimental to
the company’s competitive position.

·                  Regarding your projects in the aggregate,
please revise to disclose as part of the disclosure that you have proposed:

·                  Whether the cost to complete
projects is expected to be material.  If
so, disclose the estimated costs or a range of costs to complete such as a
minimum and maximum amount to complete.
To the extent that you cannot estimate some or any of these estimates,
disclose the reason why.

·                  If you do not believe or do
not know whether your financial position will be adequate to finance the completion
of your projects or you will need to seek financing to complete your projects,
disclose which is the case and the expected effect on results of operations,
financial position and liquidity.

Response:

Given
the diversity of Abbott’s business, its intention to remain a broad-based
healthcare company and the numerous sources for potential future growth, no
individual project is expected to be material to cash flows or results of
operations.  Factors considered included
R&D expenses projected

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to
be incurred for the project (compound or device) over the next year relative to
Abbott’s total R&D spending as well as qualitative factors, such as
marketplace perceptions and impact of a new product on Abbott’s overall market
position.

While
the aggregate cost to complete our numerous pharmaceutical and medical device
projects currently in development is expected to be material, the total cost to
complete will depend upon Abbott’s ability to successfully complete each
project, the rate at which each project advances, and the ultimate timing for
completion.  Given the potential for
significant delays and the high rate of failure inherent in the research and
development of new pharmaceutical and medical device products and technologies,
it is not possible to accurately estimate the total cost to complete all
projects currently in development.
However, we plan to manage our portfolio of projects over the near-term
to achieve R&D spend equal to approximately 9 - 10% of sales each year.

We
will include the statements above in our previously proposed disclosure.  We believe that our financial position will
be adequate to finance the completion of our R&D projects.

Conclusion
of TAP Pharmaceutical Products Inc. Joint Venture and Sale of Abbott’s Spine
Business, page 33

2.                                       It is unclear
why a confidential treatment request was requested in response to our comments
three and four.  Please provide to us
written substantiation in support of the need for confidential treatment of the
information requested.  In addition,
please:

·                  Resubmit your paper response and limit your Rule 83
request to only those portions of the response letter which must truly remain
confidential;

·                  Submit an electronic version of the response
letter as CORRESP and include all the non-confidential information in that
letter; and

·                  Redact the information subject to the new Rule 83
request and mark the response letter using brackets or other clear markings to
indicate the location of the omitted material.

Response:

Under
the agreement to conclude the TAP Pharmaceutical Products, Inc. (TAP)
joint venture, Abbott is required to collaborate in good faith with Takeda to
obtain Takeda’s consent to any public disclosure with respect to the
agreement.  Abbott was not able to obtain
Takeda’s consent in time to meet your request that our response to your April 22,
2010 letter be submitted within 10 business days.  Therefore, we requested confidential
treatment.  Given that we have now
obtained Takeda’s consent to publicly

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disclose
our response, we have included a copy of our previous paper response below so
that it will be submitted electronically as CORRESP.

Response
previously provided on May 6, 2010:

Conclusion
of TAP Pharmaceutical Products Inc. Joint venture and Sale of Abbott’s Spine
Business, page 33

3.              You
disclose that you receive payments from Takeda based on specified development,
approval and commercial events being achieved with respect to products retained
by Takeda and payments from Takeda based on sales of products retained by
Takeda, which are recorded as Other (income) expense, net as earned.  Please quantify the payments received and how
these payments are recognized, as “as earned” is vague.  Also, clarify the time period these payments
will terminate.

Response:

Abbott
received payments from Takeda totaling $244 million based on the following
events, as specified in the agreement to conclude the TAP Pharmaceutical
Products, Inc. (TAP) joint venture:

·                  $71 million when a drug specified in the
agreement was submitted by Takeda for FDA review and the New Drug Application
(NDA) was not withdrawn within a specified time period,

·                  $47 million when the above drug was approved
by the FDA and launched for commercial sale in the U.S.,

·                  $71 million when Takeda initiated a Phase III
study for another specified drug and the drug’s Investigational New Drug
application (IND) was not withdrawn from the FDA within a specified time
period, and

·                  $55 million when the NDA for a third
specified drug was approved by the FDA.

Abbott
recorded the above amounts as Other Income when the specified event was
achieved.

The
agreement that concluded the TAP joint venture provides for 2 additional
events, which if achieved, would result in the payment of additional milestones
to Abbott.  One event will not occur as
product development was discontinued and the other event does not appear
likely.  If the latter event is not
achieved, no additional accounting will be required for milestone payments.

Additionally,
Abbott received royalty payments of $48 million, $174 million, and $21 million
in the last 8 months of 2008, calendar year 2009, and the first three months of
2010, respectively, based on sales of products retained by Takeda, primarily
the drug Prevacid.  Royalties are earned
as Takeda sells Prevacid and other products and Abbott records these royalties
as sales are made.  Abbott is entitled to
receive payments based on Takeda’s sales of

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specified
products through April 2013.
However, the amounts have declined significantly in 2010 due to generic
competition on Prevacid.

In
future Form 10-K filings, we will modify our disclosure to further explain
“as earned”.  The disclosure will state
(change highlighted in bold):

Abbott
also receives payments based on specified development, approval and commercial
events being achieved with respect to the products retained by Takeda and
payments from Takeda based on sales of products retained by Takeda, which are
recorded by Abbott as Other (income) expense, net when the
specified event is achieved or as the applicable sales are made.

4.              We also
note that the payments you made to Takeda related to certain research and
development events not achieved on the development assets retained by Takeda
ceased in 2009.  Please clarify why these
payments ceased and no further payment is required which resulted in the
company recognizing $797 million in other income.  In your response, please explain to us why
you accrued the original $1.1 obligation in 2008 and reference for us the
authoritative literature you relied upon to support your accounting.

Response:

The
agreement that concluded the TAP joint venture included terms related to the
sale of Abbott’s equity interest in TAP whereby Abbott would pay specified
amounts if specified development-stage drugs received by Takeda did not
progress to a targeted result by a targeted date.  Takeda reverted the license for one specified
drug to the licensor after conclusion of the TAP joint venture and we were
required to make payments to Takeda of $200 million and $83 million in 2008 and
2009, respectively.  The 2008 and 2009
payments were charged against the original $1.1 billion obligation.  Payments totaling an additional $797 million
would have been required if FDA approval had not been obtained for two
specified products within a targeted time period.  Takeda obtained approval for the two products
in 2009 and as a result, the payments were no longer required and the $797
million obligation was derecognized.

Under ASC 450-30-25
(formerly paragraph 17 of FAS 5), “a contingency that might result in a gain
usually should not be reflected in the financial statements because to do so
might be to recognize revenue before its realization.”  The contingent payments of $1.1 billion
represent contingent gain on the exchange transaction.  If we had not accrued the original $1.1
billion obligation in 2008, the exchange of Abbott’s investment in TAP for TAP’s
Lupron business would have resulted in a larger gain at close and in the
recording of a contingent gain.  Under
that accounting, when Abbott was required to make the payments of $200 million
and $83 million that it made, Abbott would have been required to reverse the
previously recorded gain related to the same matter.

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Definitive Proxy Statement of Schedule 14A filed March 15,
2010

General

3.             We note that you have not
included any disclosure in response to Item 402(s) of Regulation S-K.  Please advise us of the basis for your
conclusion that disclosure is not necessary and describe the process you
undertook to reach that conclusion.

Response:

Abbott
did not include any disclosure in response to Item 402(s) of Regulation
S-K based on the statement found on page 17 of Release No. 33-9089
(Proxy Disclosure Enhancements, dated February 28, 2010), which states, “the
final rule does not require a company to make an affirmative statement
that it has determined that the risks arising from its compensation policies
and practices are not reasonably likely to have a material adverse effect on
the company.”

During
2009, Abbott, through its Human Resources department in coordination with
Internal Audit, conducted a risk assessment of its compensation policies and
practices for employees, including those related to its executive compensation
programs.  Abbott’s risk assessment
included a qualitative and quantitative analysis of its employee compensation
and benefit programs, including those for its executive officers. Abbott also
considered how these programs compare, from a design perspective, to programs
maintained by other companies.  Based on
this assessment, Abbott determined its compensation and benefit programs
appropriately incent employees and any risks arising from its compensation policies
and practices are not reasonably likely to have a material adverse effect on
Abbott.  The following factors were among
those considered in making this determination:

·      Abbott’s long-established compensation structure has
contributed to a corporate culture that encourages employees to regard Abbott
as a career employer.  For example,
Abbott’s U.S. employees participate in an Abbott sponsored defined benefit
pension plan.  Equity awards (discussed
in more detail below) also vest over multi-year periods.  Both forms of compensation encourage Abbott
employees to consider the long-term impact of their decisions and align their
interests with those of Abbott’s shareholders.

·      Abbott’s long-term incentive program focuses
executives on longer-term operating performance and shareholder returns.  For 2009, Abbott’s officers received 64% of
their total compensation in the form of long-term equity incentives (25% of
which are stock options, vesting over multi-year periods and 75% of which are
performance awards, which vest over a period of up to five years with not more
than one-

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third of the award vesting in any one year).  Abbott’s officers do not receive any of their
long-term incentive compensation in cash.

·      Abbott’s annual incentive program places an
appropriate weighting on earnings achievement by balancing it with other
factors, such as those described in this comment response.  Since earnings are a key component of stock
price performance, this aspect of Abbott’s compensation plan also promotes
alignment with shareholder interests.

·      Abbott makes equity awards and sets grant prices at
the same time each year, at the compensation committee’s regularly scheduled
meeting.  In addition, Abbott does not
award discounted stock options or immediately vesting stock options or
restricted stock.

·      Abbott has share ownership guidelines for its
officers, which promotes alignment with shareholder interests.

·      Abbott’s compensation committee has the ability to
exercise downward discretion in determining annual incentive plan payouts.  Historically, and in 2009, the compensation
committee exercised its discretion to deliver annual incentive plan awards
below the maximums.

·      Abbott requires mandatory training on its codes of
conduct and policies and procedures to educate its employees on appropriate
behaviors and the consequences of taking inappropriate actions.

·      Abbott does not include certain design features that
may have the potential to encourage excessive risk-taking, including:
over-weighting toward annual incentives, highly leveraged payout curves,
unreasonable thresholds, and steep payout cliffs at certain levels that may
encourage short-term business decisions to meet payout thresholds.

This
assessment was discussed with the Compensation Committee’s independent
compensation consultant, Hewitt Associates LLC, which agreed with Abbott’s
conclusions and with the Compensation Committee.  Hewitt also discussed Abbott’s compensation
policies and practices, and informed the committee that the risks arising from
Abbott’s compensation policies and practices are not reason